The way Writer works with styles is same how every other type setting program does it. Indesign, Scribus, Affinity, Quark. Not sure how this would be out of the ordinary. Maybe MS Word doesn't have paragraph styles at all? Not sure i haven't used in in a long while.

Character styles are settings for selected group of characters (things ike emphasis, italic, underline). Paragraph styles are set for whole paragraph you are in. You make new paragraph by hitting enter. If you hit enter twice you make two paragraphs. In paragraph style you define how paragraphs should be separated (empty line, first line indent, rule whaever you want). You should never do what can be done using paragraph style by writing them because later when you want to change them you would have to change it everywhere instead just changing style.